In 2020, the world economy shrank by 4.3%.
During this time, many organizations were in ‘emergency’ spending mode to enable their enterprises with ‘Work from Anywhere (WFA)’ features for remote access and edge computing which, in many cases, resulted in sub-optimized purchasing that has only worsened over time as costs continue to rise and business forecasts continue to slow.
See our previous blogs on this topic:
- Like a Bad Hangover, Did You Wake Up in 2022 Budgeting Season and Wonder Where Your Money was Spent?
- Is ‘Overspend’ Culture Impeding Your Digital Transformation
Just as the global economy seemed to be bouncing back from the negative effects of the global pandemic, we are facing a growing list of political and economic indicators that seem to be foreshadowing an oncoming Global Recession:
- Rampant Inflation
- Rising Interest Rates
- The War in the Ukraine
- Increasing Russian Sanctions
- China’s “Zero” COVID Policies
- Consumer Confidence and Spending Down
- Supply chains are under pressure due to continued volatility
- Inverted yield curves on short-term and long-term US treasury bonds
According to Senior Strategist Ben Snider of Goldman Sachs, “Profit margins are at record highs, companies are dealing with incrementally higher input costs and the key question for investors is going to be whether companies will be able to sustain these record profit margins as growth slows, but those input costs continue to rise”.
Bill Dudley, the former president of the Federal Reserve Bank of New York, recently warned in an op-ed that a recession was now “virtually inevitable”. Along these same lines, the US Federal Reserve is expected to oversee at least six more rate increases this year after a quarter percentage point hike in March.
So, if we are headed towards a global recession, what is the #1 Thing CEOs can do to prepare and protect their people and their organizations from the negative fallout? Answer? Sponsor a strategic effort to reduce IT costs.
Really? Why IT Costs you might ask? Well, we’ve been doing this now for 20 years, and there is one certainty. Among the 75+ cost-savings categories that our partners deploy to capture value, (everything from employee health benefits to office supplies), Information Technology is and remains the best spend category to target for Cost Reduction for the following 4 reasons.
- Highest Spend. For Most Modern Enterprises, IT is the largest indirect cost category.
- Lowest Risk. Paying less for technology with the same use case doesn’t increase business risk.
- Best Yield. Optimizing IT costs returns between 200-2000% returns (.95 Probability).
- Modernization. Accelerate Digital Transformation with better technical solutions that offer greater value but cost less.
CFOs have long pressured CIOs for cost-cutting initiatives, and CIOs have long pushed back in clever, albeit trivializing ways by saying, "sure boss – we’ll shut off email, and that should save us a few million per year". The obvious brush-back is designed to communicate a lack of understanding of the intricate interdependencies of enablement with enterprise technology (and proffer a tongue-in-cheek ‘solution’). It’s a power-play designed to tell the financial folks that they are beyond their depth when discussing technical matters with technologists. They might as well say, “Stay in your Lane”. However, when this is an initiative sponsored by the CEO, it takes on new meaning. It’s no longer just a financial exercise designed to trim budgets (and perceived organizational power), it becomes a strategic imperative to shelter and improve the business.
What happens if the experts are wrong and there is no global recession afterall? You will still benefit from a leaner organization, with a higher profit margin, an improved ability to compete, and a more modern enterprise (all good). As a result, whether it’s an effort designed to combat the negative effects of a global recession, or to generate improved financial performance, to become more competitive in a global marketplace, or to accelerate your digital transformation initiatives, CEOs should sponsor and CFOs should champion IT cost-cutting initiatives designed to bring money to the bottom line with no diminution of business value (and/or to consider cost savings ideas that further enable digital transformation), and you should strongly consider NET(net) as your partner in this endeavor as this has been our sole and exclusive focus for 20 years, and we have been widely recognized by the most demanding organizations on earth as best in class.
NET(net) can help you minimize costs and risks, while maximizing the realization of value and benefit of all your technology agreements, investments, and relationships, so if you are looking to improve operational efficiency and/or modernize your enterprise, Act Now.
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Founded in 2002, NET(net) is the world’s leading IT Investment Optimization firm, helping clients find, get, and keep more economic and strategic value. With over 2,500 clients around the world in nearly all industries and geographies, and with the experience of over 25,000 field engagements with over 250 technology suppliers in XaaS, Cloud, Hardware, Software, Services, Healthcare, Outsourcing, Infrastructure, Telecommunications, and other areas of IT spend, resulting in incremental client captured value in excess of $250 billion since 2002. NET(net) has the expertise you need, the experience you want, and the performance you demand. Contact us today at firstname.lastname@example.org, visit us online at www.netnetweb.com, or call us at +1-866-2-NET-net to see if we can help you capture more value in your IT investments, agreements, and relationships.
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